Removal of 20 Partner Limit

The Government announced on 20th December 2002 that the 20 partner limit has been abolished in relation to all partnerships and limited partnerships in Great Britain (but not Northern Ireland).

The Regulatory Reform (Removal of 20 Member Limit in Partnerships etc) Order 2002 repeals sections 716 and 717 of the Companies Act 1985 and amends section 4(2) of the Limited Partnerships Act 1907. (Limited liability partnerships formed under the Limited Liability Partnerships Act 2000 are bodies corporate, not partnerships, and there is no restriction on the number of members they may have).

Historically, there have been numerous exemptions from the 20 partner limit - for example, for solicitors, accountants and other professionals - made by separate statutory instruments. These are now unnecessary for British partnerships. So too are the Limited Partnerships (Unrestricted Size) No. 4 Regulations 2002, which came into force on 22nd March 2002 (as reported on LawNow here) and which abolished the 20 partner limit for UK limited partnerships which are collective investment schemes and are operated or managed by an authorised person. (The regulations will remain relevant to Northern Irish limited partnerships).

Limited partnerships are commonly used as investment vehicles, particularly for real estate and private equity funds. Although many of these partnerships are collective investment schemes and already benefit from the earlier regulations, others have remained subject to the 20 partner limit as a result of falling outside the definition of "collective investment scheme". The change means that there will no longer be any need to establish parallel partnerships, although existing partnership agreements should be checked to ensure that they do not restrict the number of partners.

For further information, please contact:
Barney Hearnden
Corporate Partner
Phone: +44 (0)20 7367 2878
Email: [email protected]